Yen Weakens as Senior BoJ Official Advocates for Prudent Exit from Negative Rates
Uchida confirmed that the Bank would reconsider its stimulus measures if the 2% price goal is sustainably met and remains stable—a prerequisite for contemplating interest rate hikes.
NEWS
2/11/20242 min read
Yen Weakens as Senior BoJ Official Advocates for Prudent Exit from Negative Rates
USD/JPY Analysis: Heading Towards 150
In this analysis, chart patterns and key support and resistance levels are utilized. For more details, refer to our extensive education library.
BoJ Official Reiterates Prudent Approach Ahead of Normalization
Remarks from the Bank of Japan’s Deputy Governor Shinichi Uchida have softened the yen on Thursday morning, offering insight into the policy setting committee's mindset. Uchida confirmed that the Bank would reconsider its stimulus measures if the 2% price goal is sustainably met and remains stable—a prerequisite for contemplating interest rate hikes.
He further clarified that even after adjusting interest rates to zero or positive territory, additional hikes may not be immediate. While markets anticipate an exit from negative interest rates, attention now focuses on the timing and scale of rate increases. Uchida's remarks are closely monitored given his history of providing crucial policy hints.
However, Uchida indicated that the BoJ will continue bond buying even after discontinuing yield curve control, aiming to manage borrowing rates to prevent adverse effects on economic activity from rising interest rates.
The yen's broad decline persists, as reflected in the constructed Japanese Yen Index, indicating its weakening trend.
Japanese Yen Equal Weighted Index (USD/JPY, GBP/JPY, EUR/JPY, AUD/JPY)
USD/JPY Edges Higher Towards 150
USD/JPY advances towards the psychological level of 150, supported by encouraging US economic data, despite a slight weakening of the dollar this week.
The pair trades above the 200-day simple moving average (SMA) and tests the recent January high. Recent Fed statements have been neutral, maintaining expectations of multiple rate cuts this year despite the resilient US economy. Minneapolis Fed President Neel Kashkari hinted that current interest rates may not be as restrictive as anticipated, considering the higher neutral rate. The neutral rate signifies an interest rate level that neither stimulates nor restricts the economy.
While the bullish momentum warrants monitoring, downside setups may gain traction as the year progresses, especially leading up to the March and April BoJ meetings, crucial for potential rate adjustments. The BoJ's cautious approach aims to ensure stable market conditions upon transitioning to non-negative rates. Support levels lie at 146.50 and 145.89.